Keeping up with the campus consumer

When the University purchased the property located at 551 South Division Street in late 2012, forcing the building’s longtime tenant Blimpy Burger to move to a new location on South Ashley Street, local news sites, blogs and social media exploded with retrospectives and eulogies for the Ann Arbor food landmark. University alumni, current students and veteran Ann Arborites lamented the loss of a Central Campus fixture that had united the Ann Arbor community for more than half a century — a taste of local color that, like Cottage Inn Pizza, the Michigan Theater or the Ark, helped to differentiate the city from other college towns in America.

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But Blimpy Burger’s move from South Division isn’t the first example of a local fixture being forced out of the Central Campus area in recent years.

Another Ann Arbor mainstay, David’s Books, was supplanted by Potbelly’s Sandwiches on the corner of State and Liberty in 2003, leaving behind only its iconic Liberty Street mural before going out of business at a new location on East William Street. More recently, Seva, a restaurant offering vegetarian cuisine on East Liberty Street, had to abandon the space it occupied in the VFW Hall building and relocate to the Westgate Shopping Center after forty years. The owners found themselves with no choice when they were faced with a rent increase of more than 50 percent last summer.

While the circumstances surrounding these moves are unique to each situation, the fact that local fixtures like Seva and Blimpy Burger are finding themselves uprooted from their longtime homes shows that one thing is certain: Ann Arbor is changing, and the independent businesses that help make the city unique are, at least in some cases, being pushed out in the process.

Understanding student demand

As a freshman getting my first taste of Ann Arbor two years ago, I, like many other students, began cautiously venturing out of my West Quad dorm room to explore the town. Naturally, I followed the crowds of my fellow lanyard-toting newcomers up and down the streets bordering the Diag, where I was surprised to find, for the most part, familiar storefronts. Chipotle, Starbucks, CVS and 7-Eleven were all there to greet me in this foreign landscape, offering products that I knew I could trust at prices I could afford.

The vast majority of my first purchases in Ann Arbor — and many of my subsequent ones as well — were made in the chain stores lining the streets closest to campus. And, as University alum Nick Lemmer, the owner of Iorio’s Gelateria, observed, my purchasing habits as a student reflect the breakdown of his clientele.

“I would say that almost 70 percent of our customers are just Ann Arborites,” he said. “The student market is a very hard one to hit because it’s changing every year.”

In areas farther away from Central Campus, students make up an even smaller portion of businesses’ regular customer base.

“If you talk to any business owner on Main Street,” said Maura Thomson, executive director of the Main Street Area Association, “they would say they would like to capitalize more on the student population. On a day-to-day basis, I would say the Main Street area is more looked at by students as the place where you take your parents when they come into town.”

But why don’t students shop at local stores more often? Why do students express such ravenous loyalty to certain local brands like Blimpy Burger or Cottage Inn, while spending the majority of their cash at generic chain stores?

Part of the answer to those questions may be found, as Assistant Professor of Marketing Scott Rick explained, in consumer psychology.

“People do tend to be risk averse on average,” Rick said. “It’s like ‘a bird in the hand versus two in the bush.’ Like ‘I know what Five Guys can give me, but Red Hawk? That sounds weird.’”

Ruby Wallau/Daily

Breaking with habit and trying a new store or restaurant can be difficult, and often requires that the potential customer be faced with an unusual circumstance.

“Often you have to be in some kind of unusual state, you want to impress someone or you’re in a particularly good mood, and when people are in a good mood they explore more,” Rick said.

Part of the answer may also be a marketing problem, as Iorio’s owner Nick Lemmer explained.

“Every year, you have a whole new group of people who don’t know you’re here, and every four years that group of however many thousands of people is gone,” he said. “It can be expensive and you have to be sure that you’re spending your marketing money in the right way to get that captive audience.”

Combine inherent consumer risk aversion, the difficulty of developing brand loyalty with a rapidly changing student population, and the proximity of State Street and South University to student housing, and the realization that students spend most of their money at the chain stores lining those streets doesn’t come as much of a surprise.

A tale of two cities
What is surprising is the rate at which the business landscape in Ann Arbor is changing to reflect the competing demands of convenience-focused students clustered around central campus.

John Kerr, an Ann Arbor native and owner of Wazoo Records on State Street, has seen profound changes in the areas closest to central campus since growing up in the city in the ’50s and ’60s.

“I remember going over (to South University) Christmas Eve because I had some desperate last minute gift to get and was shocked to find — this was in the last few years — that everything was closed. When the students leave town, they just have no reason to stay open. It was like a ghost town, this was noon-ish on Christmas Eve,” Kerr said. “And I remember shopping Christmas Eve (on South University) as a child, there were a lot of cool stores there where you could get gifts for your mom or whatever, there were all sorts of nice places.”

Kerr attributes those changes to a shift in consumer focus.

“It went from businesses that catered to the entire University community, be they staff, students, etc., to businesses that cater exclusively to students.”

For the most part, the businesses catering to student demand are not unique to Ann Arbor. There are certainly a few Ann Arbor originals, like South U Pizza, Lucky Kitchen or BTB Cantina that have succeeded in carving out a niche in the student market. Generally, they offer late hours, cheap prices and fast service, all of which attracted Iorio’s owner Nick Lemmer during his time as a student.

“For me, it was always finding something cheap,” Lemmer said. “You know, ‘Where are the coupons at?’ When I’m ready to splurge on something, maybe I’d go to a more expensive place. I never really put that much thought into where I was eating, I was just happy to be eating.”

Ruby Wallau/Daily

But, more often than not, that desire for cheap products and fast service leads students away from unique local stores and, increasingly, drives local stores away from students. The vast majority of independent businesses in Ann Arbor now cluster in areas with less student-heavy populations, like Kerrytown and Main Steet, where there seems to be a greater demand for unique business experiences.

LSA senior and Ann Arbor native Adam DesJardins, who currently lives in Kerrytown, prefers shopping at local businesses as a way to support the community and preserve the uniqueness of the city.

“I would say I favor the local places, just because I think that my money goes further, honestly. I feel my money goes further because I’m supporting a place I love … I just think that when you have a community and a town, you think of your three favorite places, they’re not necessarily like CVS and Walgreens. You don’t say ‘I love Ann Arbor because the Chili’s there is awesome.’”

Thomson saw that same love for the authentic Ann Arbor experience during the Great Recession of 2008.

“We weathered it a lot better than I thought we would,” Thomson said. “And I think that’s a testament to the longtime business owners we had down there. I think it speaks a lot to the support of the community. There were a lot of people that made an effort … redoubled their efforts to support the community. And around that time I think we also became more aware of supporting local, you know, the whole message started getting out there more.”

The drive to support local stores has created what Thomson describes as a thriving “experience economy” in areas like Main Street and Kerrytown, with customers willing to spend more for the unique products and services offered by independent businesses.

Ruby Wallau/Daily

The cost of development

The increasingly sharp divide between the convenience-focused businesses around Central Campus and the “experience economy” of areas like Main Street and Kerrytown is part of a larger process of growth and development in Ann Arbor that has perhaps done the most to alter the appearance of the city in recent years.

A number of high-rise apartments and office spaces have supplanted smaller buildings and now dominate the skyline in the areas around South University and the Michigan Union as well as along Huron Street on the North Side of town. Kelly Cobb, a University alum who recently returned to Ann Arbor to open Hunter House Hamburgers on East William, was stunned when he first saw the rate and scale of the change.

“When my wife and I first pulled up not having been here in eight years, Ann Arbor was very unrecognizable,” Cobb said. “The number of high-rises that came in was shocking, I had friends’ apartments that were just gone and replaced with 15 story buildings.”

That development has been partially driven by an influx of high-tech firms, which have provided high-paying jobs and increase Ann Arbor’s recognition beyond its association with the University. As Kerr, the owner of Wazoo records, has seen in recent years, Ann Arbor is becoming an increasingly popular tourist destination.

“I’ve noticed that the trend over the last few summers that kind of fascinates me is that it seems like it’s almost more of a tourist crowd in town. I get the impression that Ann Arbor has become a little better known nationwide as a good place to visit, even if you’re not on University business, you know, with the restaurants and the things to do culturally.”

Yet, Ann Arbor’s recent growth may actually be providing the greatest challenge for the city’s independent local businesses.

Seva restaurant was forced to relocate outside of the downtown area when faced with a massive rent increase, and in nearly every interview I conducted while doing research for this piece, members of the Ann Arbor business community expressed concern about the effects of rapidly rising rents on local businesses.

“In a way we’re a victim of our own success,” said Thomson. “We are a very successful downtown which means rents are a certain amount. A property owner is the only one that has the ability to dictate who is coming into a space, so it comes down to rent and who can afford the rents that are being charged.”

As the changing business climate in recent years has shown, both national and Michigan-based regional chains seem slightly better equipped to cope with those rising costs than many unique Ann Arbor businesses.

Ann Arbor in the balance
Ann Arbor faces a dilemma that continues to grow in scope and seriousness with each passing year. As a city, how does it strike a balance between progress and preservation?

For Cobb, owner of Hunter House, the two aren’t necessarily at odds.

“There’s a lot of discussion about whether (Ann Arbor) should grow out more or stay what it is, but I don’t see them as mutually exclusive. I think you can draw more people in, but still have the unique Ann Arbor feel that is so Ann Arbor.”

For Thomson, executive director of the Main Street Area Association, preserving the unique Ann Arbor experience is equally important.

“I think that’s really what sets us apart and, for me, that’s the message that I’m always trying to put out there. We have to be careful that we don’t become ‘Everywhere, U.S.A.’ ”

And for DesJardins, a University student, Ann Arbor’s originality seems to be ebbing away.

“To me, to see all of these new places coming in is a little sad. I mean it’s fair game because they’re still businesses, but I definitely prefer local businesses when it comes to that.”

But if one thing is certain, it’s that students play an important role in shaping Ann Arbor’s business landscape. If Ann Arbor is going to succeed in maintaining its unique character, we might need to do a better job of getting out and exploring the town.